Michigan schools have received some financial help from an unexpected source--Japan.
In an unprecedented financial agreement, five Japanese banks agreed to guarantee $500 million in notes to the state. The state needs to borrow the money to make payments this fall to schools, colleges, and local governments.
“This means that in October and December, schools will get the money promised them by the state,” said Phillip E. Runkel, state superintendent of public instruction. “We had been worried that the regularly scheduled aid payments would be delayed. This doesn’t end all our problems, but it ends that worry.”
The agreement will help offset the effects of Michigan’s poor credit rating, which last spring was dropped to the lowest level among the 50 states.
State officials worried that they would not be able to sell short-term notes to raise money for school- and government-aid payments.
Under the agreement, Michigan can substitute the excellent credit rating of the five Japanese banks for its poor rating. The banks, led by Tokyo-based Mitsubishi Bank Ltd., will share a fee of about $5.6 million for “lending” their credit rating to the state.
Masamichi Yamada, a spokesman for Mitsubishi, said the agreement was an effort to “promote goodwill in the United States,” and noted that many of Michigan’s economic problems stem from the success of Japanese automakers.
Officials in Michigan’s local school districts said the Japanese loan guarantee should end, at least for the near future, the threat of payless paydays for employees.
